Is strategic sourcing helping small business?

Small firms' offerings don't always fit the initiative's model.

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Is the Federal Strategic Sourcing Initiative working for small business? Some in Congress and in the contracting community are worried that it's not.

The concern raised by industry representatives, and by Rep. Richard Hanna (R-N.Y.) at a June 13 hearing of the Contracting and Workforce Subcommittee of the House Small Business Committee, is that the use of strategic sourcing vehicles are making it difficult for small businesses to compete to provide the government with goods and services.

As the single largest purchaser in the world, the U.S. government can alter market sectors when it makes buying decisions. If participation in a few huge, government-wide contracts is limited to relative handful of companies, a possible unintended consequence could be the erosion of competition in certain sectors. And that, in turn, could affect the value the government gets from these contracts by curtailing competition in certain areas over the long term.

"The Federal Strategic Sourcing Initiative should work toward leveraging the buying power of the government to enhance competition, driving down prices and capitalizing on all that small businesses have to offer in order to achieve long term savings, rather than focusing on short term savings at the expense of small businesses," Hanna said. "I hope the administration reconsiders its approach to the Federal Strategic Sourcing Initiative and considers embracing a philosophy of full and open competition.”

While strategic sourcing is best understood as an analytical approach to spending, witnesses said that procurement officers too often focus on reducing unit costs in the short term. "No one ever got an award for a paying a little bit more for something just because it might have some long-term value," said Stan Soloway, president and CEO of the Professional Services Council.

Another concern is that complex services and certain goods don't fit the commodity model of strategic sourcing. Small business in the IT space frequently offer goods and services, "in response to narrow, unique mission requirements or as a specialized component of a broader prime contractor activity," said Trey Hodgkins, senior vice president of global public policy at TechAmerica. Those offerings "simply do not fit into the commoditized labor categories envisioned under strategic sourcing."

On the government side, the focus is on the savings strategic sourcing can generate. For example, since fiscal 2012 the government has saved $300 million by using strategic sourcing on commodity goods and services like office supplies and domestic shipping. Joe Jordan, administrator for federal procurement policy at the Office of Management and Budget, said that agencies can be more efficient while bringing small businesses along for the ride.

By partnering with government, Jordan said, "these businesses get the revenue they need to create jobs and grow the economy, while government gets access to some of the most innovative companies in the supply chain."

However, there are some limitations emerging, for example in the General Services Administration's new One Acquisition Solution for Integrated Services (OASIS) vehicle, a $10 billion governmentwide acquisition contract for advanced services, including management consulting and IT support. Jeffrey Koses, director of the office of acquisitions operations at GSA's Federal Acquisition Service, said that it will be important for OASIS winners "to show past success." It would be "difficult for this to be a first government contract" for a small business, Koses allowed, but he said there would be opportunities for small firms to come in as subcontractors.

There is no legislation moving currently to change the way small businesses are treated under the Federal Strategic Sourcing Initiative, but Rep. Hanna is offering a version of the Make Every Small Business Count Act of 2013 as a bipartisan amendment to the National Defense Authorization Act of 2014. It is designed to make it easier for small businesses to get access to subcontracts in federal projects.

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